you saw them lots of cryptocurrency-related Super Bowl ads, and you might have found them weird, or deeply dystopian, or just plain disturbingly familiar. Despite this, you may believe that the blockchain still has financial rewards to reap and want to jump in, or you may already have some of your money tied up in cryptocurrencies via companies like Coinbase and FTX that have been promoting during the big game.
What now? Keeping tabs on the ups and downs of Bitcoin, Ethereum, and other cryptocurrencies and actively trading those swings can be a full-time job. Day trading basically. And the jump into NFTs, the digital orbs you can mint, buy, or sell, is still daunting for many.
For many crypto traders who are in it for the medium to long term, there are a few other ways to make money from cryptocurrency just sitting in your crypto wallet: staking and yield farming on DeFi networks. “DeFi” is just a catch-all term for “decentralized finance” — pretty much all services and tools built on blockchain for currencies and smart contracts.
Basically, cryptocurrency staking and yield farming are pretty much the same thing: they involve investing money in a crypto coin (or multiple at a time) and collecting interest and fees from blockchain transactions.
Staking vs Yield Farming
Staking is easy. Typically, it involves holding cryptocurrency in an account and collecting interest and fees as these funds are allocated to blockchain validators. When blockchain validators facilitate transactions, some of the fees generated go to stakeholders.
This type of hold-for-interest has become so popular that established crypto traders like Coinbase are offering it. Some tokens, like the very stable USDC (pegged to the US dollar), offer around 0.15 percent annual interest rates (not too different from putting your money in a low-yielding checking account at a bank), while other digital currencies do you could earn 5 or 6 percent a year. Some services require wagering to lock funds for a period of time (which means you can’t deposit and withdraw whenever you want) and may require a minimum amount to earn interest.
Yield farming is a bit more complicated, but not that different. Yield farmers add funds to liquidity pools, often by pairing more than one type of token at a time. For example, a liquidity pool that pairs the Raydium token with USDC could create a combined token capable of earning an annual percentage rate (APR) of 54 percent. That seems absurdly high, and it gets even weirder: Some newer, extremely volatile tokens could be part of yield farms offering hundreds of percent APR and 10,000 to 20,000 APY (APY is like APR but accounts for compounding).
The rewards, which accumulate 24/7, are usually paid out as crypto tokens that can be harvested. These harvested coins can be reinvested into the liquidity pool and added to the yield farm for bigger and faster rewards, or withdrawn and converted to cash.
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.